Basic Economic Concepts
This section introduces the basic economic problem and the concepts the Myanmar Matriculation Economics paper uses to frame later topics: scarcity, choice, factors of production, opportunity cost, and the production possibility frontier (PPF). Questions often ask you to classify resources, identify the reward to each factor, or distinguish positive from normative statements.
Core rules
- Economics studies how society allocates scarce resources among competing wants.
- Wants are unlimited; resources are limited. Goods are tangible, services intangible.
- Factors: land (rent), labour (wages), capital (interest), entrepreneurship (profit). Capital means produced means of production, not money.
- Three questions: what, how, for whom.
- The PPF shows maximum combinations of two goods with fixed resources and technology. Points on the curve are efficient; inside is inefficient; outside is unattainable. A concave curve shows increasing opportunity cost.
- Microeconomics studies individual units; macroeconomics studies aggregates. Positive statements are testable; normative statements contain value judgments.
Worked example
An economy can produce 100 tonnes of rice or 50 bolts of cloth with fixed resources. Moving from all rice to all cloth, each extra cloth costs 2 tonnes of rice (100 ÷ 50). If rice is on the vertical axis, the PPF slope is -2. A point at 80 rice and 20 cloth lies inside the curve, so resources are unemployed. If technology improves only cloth production, the cloth intercept rises and the PPF pivots outward on the cloth axis.
Traps
Do not call money capital; do not confuse a movement along the PPF with a shift of the PPF; do not treat “should” statements as positive; do not say scarcity is the same as a shortage.